natural gas | Financial Crooks

I read an interesting discussion recently about the costs of owning a home. A person was surprised that his friend had to pick up a second job to pay the bills after buying a house and wanted to know if the cost his friend quoted per month was normal. It led me to go back through our bills to find out how much we pay a month to run our house on top of the costs to pay off the mortgage.

How Much Do You Budget to Pay for Hydro, Natural Gas, Water, Property Taxes and Insurance per Month for a Detached House?

We live in a large city in Ontario but we don’t live in Toronto. Our house is detached, fairly old, but not particularly large.

The costs for things like electricity vary quite a bit from month to month, so I’ve taken our annual costs and divided them by 12, rather than report an actual month by month number. Most companies won’t annualize your costs, though, so be prepared to have some months where your bills are much higher than others.

In 2017, our home cost us

$124 Electricity / Hydro
$48 Water (including Storm Water and Waste Water charges)
$94 Natural Gas (including to burn for the water heater and for the pilot light in a seldom used fireplace insert)
$405 Property Taxes
$82 Home Insurance

How Much Should I Budget Per Month to Run Our House?

So our total costs for heat, hydro, water, property taxes and insurance add up to:
$ 753 per month.

Add in a typical cost for cable TV, internet, home phone and cell phones and you’re easily at almost $1000 per month. I didn’t include those because it would be easier to reduce or eliminate those costs than the ones I’ve included.

You can compare our costs to those reported by others for 2017 for homes around the GTA on this RedFlagDeals forum post.

What Else Do I Need to Budget For?

Other costs that might have been included in your rent are for:

Cable TV
Internet and Home Phone

Other common costs for home owners include:

Annual and perennial plants and shrubs
Landscaping consumables like wood chips, mulch, yard waste bags or bins, new soil, fertilizers, bird seed, insecticides for lawn grubs, ants or wasps
Gasoline or Transit, if you need to start commuting to work
Household Tools and Consumables, including snow shovels (which break and get stolen), yard work tools, building and repair tools, vacuum cleaners, ladders, lightbulbs, mops and brushes, buckets
Minor Decorating On-going Costs, including for re-painting, draperies or blinds, area rugs, furniture, art work
Big Ticket Maintenance, including a new roof, new windows or doors, a new furnace and air conditioner, new appliances
Big Ticket Renovations, including re-tiling and re-fitting bathrooms, the kitchen, new flooring (carpets, hard wood or tiles)

You need to estimate each of these costs, divide it by how many years you have to save up to pay it, and then include that amount of saving and spending in your monthly budget.

For example, you won’t necessarily have the $7000 for a new roof every 15 years if you haven’t saved the $40 a month for 15 years to pay for it.

What Other Home Expenses Do Some People Pay for?

Lawn and yard maintenance, including annual aerating, fertilizing
Snow removal
Gutter cleaning
Driveway sealing
Window washing

Can I Carry a Home For the Same as My Rent Payment?

Unless you are renting one seriously over-priced place, you probably can NOT expect to own a home for the same monthly cost as you pay for rent. I enjoy owning a home but I do not think it saved me any money!

Related Reading

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Do you know someone who bought a home without understanding the full costs of ownership? Please share your views with a comment.

Michael James on Money started it. Then BigCajunMan took over— trying to estimate how much income he could draw out of a retirement nest egg based on various factors including inflation and the rate that the investments grow before withdrawal. As he says, it is very hard to pick what percentage to use for inflation. CPP is also “indexed” to inflation at a rate picked by the government so your monthly check can go up. I’ve generally found our bills go up more in a year than that government rate, though. So for my personal retirement planning I wondered what rate of inflation I should use.

Being an Information Pack Rat Has Some Uses

I’ve always been an information pack rat. In fact, I could tell you how much income tax I paid for working for the public library one year while in high school. (I can guess how few people are actually going to ask that.) For this exercise, it’s handy though. I know how much we’ve paid each year, actually each month, for most of our billable household costs.

From that information, I can calculate an approximate rate of inflation.

Estimating Inflation When Costs Don’t Always Increase

It gets a bit tricky because costs don’t actually always increase. Our Natural Gas costs, for example, are significantly lower now than in the past. (Thanks to shale gas frac’ing: We now have cheap nat gas but one day when we can’t get any clean drinking water at any price we may not be so thankful.)

During the interval 2001-2012:

Highest Natural Gas year: 2006: $1727
Lowest Natural Gas year to date: 2012: $924

What should I use to estimate the rate of inflation if it’s actually deflation?

Well, if I estimate inflation too highly I will have extra money to spend on the occasional rutabaga; if I estimate it too lowly I will have to forfeit my semi-annual clementine: I vote over estimate. So I will cheat and pretend the price of natural gas rose from $924 to $1727.

Car insurance can also dip for some people as their car ages. Not for us of course! We live in a “car accident capital of Canada” so we pay almost identical insurance on our brand new Camry as we do on our 15-year-old Corolla. Go figure. We’re insured basically against what we can do to someone else. (Good thing we usually walk to work.)

Our Personal Planning Inflation Estimates Based on Costs from 2001 to 2012

Not all the numbers are in yet for 2013 so these estimates are based on payments from 2001 to 2012.

Our Property Tax Inflation

Our mayor has made a valiant effort to keep these increases as low as possible. Even so our property taxes have increased: 2.9% per year

Our Home and Car Insurance Inflation

I’m lumping these two together since we buy both from the same company and there is a discount involved.

Our insurance costs have increased: 0.46% per year

(Yes, that was surprising! Please remember though that the replacement value for one car in that time has dropped 12 years worth to basically 0.)

Our Natural Gas Inflation

NOTE: This is not the increase in cost per BTU. This is the increase in our total bill. It includes tax increases and if we had any increases in consumption per year.

This is the one I’m lying about and flipping from deflation to inflation. This is my “mad rutabaga” money.

Our natural gas rates have (decreased) increased: 5.8% per year

Our Electricity Inflation

We use more electricity now than we used to. I blame the kids.

Again, this is not the increase in cost per megawatt. This is the increase in our total bill including all the lovely surcharges added by the government and the time of use rates.

Our electricity costs have increased: 1.7% per year

Our Water Inflation

Strictly speaking, we pay for both water, waste water and water infrastructure based on how many m3 of water we use per year.

Our water costs have increased: 4.1% per year

Our Cable TV Inflation

Well, this is a bit misleading. We got rid of our cable this year when they tried to raise my rates again. However, in the interests of historical accuracy, and shock, here goes.

Our cable TV costs had increased: 3.5% per year

Our Telephone (Landline) Inflation

We aren’t really cell phone users having simple pay-as-you-go emergency phones only. So luckily, there’s only one number to report here.

This cost includes our long distance charges. We barely make any long distance calls and when we do we use one of those “dial 10-10-xxx” things so they only cost 25 cents.

Our telephone costs have increased: 0.8% per year

OK, I admit I was surprised by how low that is, too.

Our Internet Inflation

We were “early adaptors” to using high speed internet so we’ve always paid too much.

Our inflation rate is probably lower than people’s because when you start at the top, there’s less distance to climb.

Our internet costs have increased: 2% per year

Our Gasoline Inflation

This one is a bit tough to calculate too. I’m not interested in the percent increase in the cost per litre, although I could tell you that if you forced me to. I’m interested in the percent increase in total annual spending. The problem is that we only go on a major cross-Canada road trip every second year. And after someone totaled my car last year, we went down to one car for 6 months. So I think I’ll just have to skip this one.

It’s not really a mandatory retirement expense anyway, as we’ll probably have to walk everywhere when we retire because we’ll be too broke to afford a car. Unless there’s some way we could power one off those extra rutabagas….Hmmmmmm.

An Overall Personal Rate of Inflation Based on 2001-2012

So what do I get if I try the same overall calculation but based on the sum of our costs for

natural gas
electricity
water
property taxes
cable
telephone
internet
house and car insurance

Our overall personal rate of inflation for 2001-2012 was: 2.3% a year

OK, I admit it again. I’m surprised. I was expecting more like 4%.

If you want to know how that compares to our single-year rate of inflation for 2011-2012, please see: Budgeting for Retirement Requires a Good Estimate of My Personal Rate of Inflation for 2012.